3 Reasons why you should trade USDT Quarterly contracts
Are you a Crypto trader and interested in trading a futures contract?
If you were to choose a Futures contract to trade- which would be your preferred option?
For me trading the Binance USDT Quarterly Contract would be my most preferred option. Why?
This article covers three (3) great reasons why it is more profitable to trade the BINANCE USDT QUARTERLY FUTURES CONTRACT.
A survey carried out recently acknowledged that 2 out of every 3 persons actively involved in the crypto space have either heard about Futures Contracts or have traded a futures contract in the last 6 months. This statistic points to the fact that many crypto enthusiasts see Trading Futures Contracts as one of the most profitable crypto investments.
While a lot of people seem to know something about Futures, there are yet many who are confused about the difference in Futures contracts. Hence this article will cover the following headings:
● What are Futures Contract?
● What are Quarterly contracts?
● Quarterly vs Perpetual contracts — What’s the difference?
● Advantages of trading USDT Quarterly contracts
● USDT Quarterly contracts trading strategies
● 3 Reasons why you should trade USDT Quarterly contracts on Binance?
What are Futures Contract?
Futures are derivative financial contracts obligating the buyer to purchase an asset or the seller to sell an asset at a predetermined future date and set price.
A futures contract allows an investor to speculate on the direction of a security, commodity, or financial instrument and it can be used to hedge the price movement of the underlying asset to help prevent losses from unfavorable price changes.
What are Quarterly Futures Contracts?
Quarterly VS Perpetual Contracts — What’s the difference?
The most popular trading platform-Binance offers two futures trading options. They are Quarterly Futures and Perpetual Futures. The two major differences are:
1. Expiration
A quarterly futures contract allows a trader to buy or sell the underlying asset at a predetermined price before a specified period. In other words, futures contracts have a limited lifespan and will expire based on their respective calendar cycle. For instance, BTC 0925 is a quarterly futures contract that will expire 3 months upon the date of issuance at exaxtly 8.00UTC on that day.
For Perpetual futures contracts, there is no expiration date. Therefore, traders do not need to keep track of delivery months, unlike quarterly futures contracts. For instance, a trader can keep a short position to perpetuity, unless he gets liquidated or chooses to close positions manually.
2. Funding Rate
Quarterly contracts do not pay a funding rate or fee. A funding fee is the payment rate exchanged between the buyer and seller for the next funding usually every 8 hours. When the funding rate is positive, the LONGS pay the SHORTS while if it is negative, the SHORTS pay the LONGS. Note that LONGS refer to trader predicting an upward price movement while SHORTS refer to traders predicting a downward price movement.
For Perpetual Futures contracts, since there are no traditional settlements, exchanges need a mechanism to ensure that futures prices and index prices converge on a regular basis. This mechanism is the Funding Rate/Fees paid every 8 hours as mentioned earlier. Therefore, depending on open positions, Perpetual Futures traders must either pay or receive funding.
Advantages of trading USDT Quarterly contracts
The most notable advantage is that USDT Quarterly Contracts allow traders to use USDT a stable coin as the underlying asset. This is favorable to long-term position traders and hedgers as there is no funding fees to be paid. The Quarterly contract holders enjoy this luxury as it may be costly to maintain a long-term position in the market with funding fees fluctuating over time; specially in extreme market conditions making funding fees very high to pay.
A perpetual contract trader holding a position of BTC for instance, funding fees across BTC perpetual markets may surge as Bitcoin prices rally, this indicates the imbalance of buying pressure in the market. As such, this effect results in long positions becoming costlier to hold over time making Quarterly Contracts most preferred for long positions.
USDT Quarterly Contracts Trading Strategies
Here are some of the proven trading strategies that can help you make life changing profits;
The Pullback Strategy
The pullback strategy is the most common and most easy futures trading strategy. The principle is based on price pullbacks. A pullback occurs during trending markets when the price breaks above or below a support/resistance level, reverses and retests that broken level again.
For Long orders: During uptrends, the price breaks above a well-established resistance level, reverses and retests the resistance level. Once the retest is complete, a trader would enter with a long position in the direction of the underlying uptrend.
For Short orders: During downtrends, the price breaks below a well-established support level, reverses and retests the support level again. This is a pullback, and a trader would enter with a short position in the direction of the underlying downtrend.
Trading the Range
Trading the range refers to trading the bounce off some important support and resistance levels in a chart.
Most market participants are still humans who have emotions and memories. When the market has difficulties to break above a certain price level, market participants will refer to that level as a resistance level. When the price reaches the same level again, some traders will start to take profits and others will open short positions in the market, both of which will increase selling pressure on the market pair and likely send the price down.
On the other hand, when the price has difficulties to break below a certain level and reaches that same level again, market participants who have been already shorting the market might start taking profits while other will start buying at those lower prices, both of which will increase buying pressure on the financial instrument and likely send the price up. Those levels are referred to as support levels.
Breakout Trading
A popular strategy for day trading futures traders, is the trading breakouts. This strategy aims to catch the market volatility that occurs when the price is breaking out of chart patterns, channels, trend lines, horizontal S/R levels, and other technical levels.
Price can breakout to the upside or to the downside. So traders either LONG or SHORT based on the trend breakout. It requires a background knowledge of some Technical analysis elements such as patterns that include the head and shoulders pattern, inverse head and shoulders (trading the neckline breakout), rectangle, pennant and triangle patterns that often signal a continuation of the underlying trend, and double tops and bottoms. Once a breakout is confirmed, Traders take positions LONG or SHORT depending on the pattern breakout
Fundamental Trading Strategy
While most futures traders rely on Technical analysis, sometimes highly-volatility price movements are caused by some key fundamental events causing market sentiments such as FEUD and FOMO which initiates and reverse trends and break important support and resistance levels. Such events could include a news on an upcoming upgrade, partnership or even disappointing negative news about and asset and the market sentiments changes and then a sharp price movement is noticed on the charts.
Other good strategies include:
Buyer and Seller Interest Strategy
Trend-Following Strategy
Counter-Trend Trading
Spread Strategy
Calendar Strategy
Trading Strategies to Avoid include:
- Trading Very Volatile market pairs
- Scalping with very high leverage
- Holding trades over Volatile Periods like on weekends
3 Reasons why you should trade USDT Quarterly contracts on Binance?
These three (3) major reasons are why I prefer trading Binance USDT Quarterly Futures. I also get the benefit to leverage up to 125x and get settled in USDT- a stable coin at delivery of settlement at the end of the contact.
Trading Quarterly Futures can be very profitable as well as very exciting and lucrative if you have an effective trading strategy and proper risk management. You can continuously improve your trading experience and trading performance significantly by educating yourself with the Binance Academy and from other crypto educative contents online.
If you’re a new to trading futures contract, then give the Pullback strategy a try. It’s a popular trading strategy and the easiest for all futures traders.
Whichever trading strategy you choose, bear in mind that trading Quarterly futures gives you the benefit of hedging against price movements on your spot holdings, taking advantage of trading arbitrage, avoid paying high funding fees and you can get up to 7x higher rebate fees as against trading Perpetual contracts on Binance Futures.
Kindly note that the content of this article reflects my personal opinion and should not be viewed as a financial advice. Do your own Research.
To start trading Quarterly futures simply click the link below: https://www.binance.com/en/futures/btcusdt_quarter/?ref=65177765
References:
https://academy.binance.com//en/articles/a-guide-to-trading-binance-quarterly-futures-contract
https://mytradingskills.com/support-resistance-levels
https://mytradingskills.com/courses/trends-support-resistance
